page_title: Income inequality in the United States
section_title: The Great Compression, 1937–1967
hierarchical_section_title: Income inequality in the United States / History / The Great Compression, 1937–1967
caption_attribution_description: English: U.S. income inequality as measured by the pre-tax income share of the top 1% and 0.1% of households, from 1913 to 2016, using the Piketty-Saez-Zucman data.
context_page_description: Income inequality in the United States is the extent to which income is distributed in an uneven manner among the American population. It has fluctuated considerably since measurements began around 1915, moving in an arc between peaks in the 1920s and 2000s, with a 30-year period of relatively lower inequality between 1950–1980.
  The U.S. has the highest level of income inequality among its industrialized peers. When measured for all households, U.S. income inequality is comparable to other developed countries before taxes and transfers, but is among the highest after taxes and transfers, meaning the U.S. shifts relatively less income from higher income households to lower income households. In 2016, average market income was $15,600 for the lowest quintile and $280,300 for the highest quintile. The degree of inequality accelerated within the top quintile, with the top 1% at $1.8 million, approximately 30 times the $59,300 income of the middle quintile.
context_section_description: From about 1937 to 1947, a period dubbed as the "Great Compression", income inequality fell dramatically. The GINI fell into the high 30s. Progressive New Deal taxation, stronger unions, strong post-war economic growth and regulation by the National War Labor Board broadly raised market incomes and lowered the after-tax incomes of top earners. In the 1950s, marginal tax rates reached 91%, although the top 1% paid only about 16% in income taxes. Tax cuts in 1964 lowered marginal rates and closed loopholes. Medicare and Medicaid were enacted in 1965. The Earned Income Tax Credit was enacted in 1975.
  The income change was the product of relatively high wages for trade union workers, lack of foreign manufacturing competition and political support for redistributive government policies. By 1947 more than a third of non-farm workers were union members. Unions both raised average wages for their membership, and indirectly, and to a lesser extent, raised wages for non-union workers in similar occupations. Economist Paul Krugman claimed that political support for equalizing government policies was provided by high voter turnout from union voting drives, Southern support for the New Deal, and prestige that the massive mobilization and victory of World War II had given the government.
  Alternatively, Marxist George Novacks wrote, "While the American worker enjoys the highest standard of living of any worker in the world, he is also the most heavily exploited. This tremendously productive working class gets back for its own consumption a smaller part of its output and hands over in the form of profit to the capitalist owners of the instruments of production a greater part of its output than does either the English or the French working class."
caption: Share of U.S. pre-tax income earned by the top 1% (blue) and top 0.1% (red) of households 1913–2016.[8]
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